Indian Stock Futures Slump on Greek Vote, Debt Concerns

May 16 (Bloomberg) -- Indian stocks sank to a four-month
low as the rupee weakened to a record amid concern the European
debt crisis will cool demand for emerging-market assets.

Tata Motors Ltd., the Indian owner of Jaguar Land Rover,
fell the most in about 15 months after the company’s luxury car
unit reported the lowest sales in nine months. Infosys Ltd., the
second-largest software exporter that gets 21 percent of its
sales from Europe, dropped for the first time in three days. The
rupee touched an all-time low of 54.5225 a dollar.

The BSE India Sensitive Index, or Sensex, retreated 1.8
percent, to 16,030.09 at close, its lowest level since Jan. 9.
All but two members of the gauge fell and seven stocks tumbled
more than 3 percent each. Greece will hold fresh elections as
President Karolos Papoulias failed to form a ruling coalition,
threatening 240 billion euros ($306 billion) in bailouts and
prompting concerns the crisis may be worsening in Europe,
India’s largest trading partner.

“We are in an environment that’s likely to be bumpy,”
Ridham Desai, India managing director at Morgan Stanley, told
Bloomberg UTV today. European “policy makers are likely to
follow a path of gradual deleveraging. This process will have
its fits and starts. It will produce pain at various points of
time and sluggish growth. Europe will keep generating negative
news flow for us.”

Concern India’s outlook has worsened because of trade and
fiscal deficits, policy gridlock, elevated consumer prices and
faltering global growth has pressured the rupee. The currency
weakened 1.3 percent to 54.4950 at close, and has fallen 6.6
percent this quarter, Asia’s worst performance.

“Market pressures are pushing the rupee lower, considering
the global risk-averse environment we have now,” said Ravi
Ranjit, chief manager at Federal Bank Ltd. in Mumbai. “The
Reserve Bank of India seems to be intervening and I think we
will see regulatory measures to support the rupee.”

‘Bottom-Quartile Valuation’

The Sensex has retreated 13 percent from a Feb. 21 high,
exceeding the 10 percent drop that signals a correction to some
investors. The gauge trades at 12.5 times future earnings and
the 50-stock S&P CNX Nifty Index of the National Stock Exchange
is valued at 12 times, the lowest reading in more than three
years, data compiled by Bloomberg show.

“Nifty is close to its bottom-quartile valuation, and if
you go back in time you made money in three out of the four
occasions” when the gauge was that cheap, Morgan Stanley’s
Desai said. “The market is considerably more circumspect than
what the situation warrants and therefore I see upside risk to
equities. Volatility is something that you will have to live
with. If you have a 12-18 month time frame, you will probably
end up making money.” Indian equities may return 20 percent in
the next 12 months, he said.

Fund Flows

Foreigners poured $8.8 billion into domestic stocks on
optimism the Reserve Bank of India would ease monetary policy
after record increases in funding costs slowed economic growth
in the year ended March to the least in three years. The bank
reduced rates in April for the first time since 2009 and said
inflation risks may reduce scope for further reductions.

Asian equities and commodities dropped and the yen fell on
concern the European crisis may be worsening. The MSCI Asia
Pacific Index plunged 2.6 percent, its sixth day of loss. The
S&P GSCI Index of 24 raw materials dropped 1.2 percent to its
lowest since December, with gold tumbling into a bear market and
oil falling to a six-month low in New York.

India VIX, which measures the cost of protection against
losses in the S&P CNX Nifty Index, surged 6.4 percent to 23.71.
The Nifty Index declined 1.7 percent to 4,858.25. The BSE-200
Index dropped 1.5 percent to 1,981.23. A total of 772 million
shares traded on the BSE and NSE yesterday, 15 percent less than
the 12-month daily average.

Jaguar Sales

Tata Motors lost 6.8 percent to 270.55 rupees, the most
since since Feb. 24, 2011. Jaguar Land Rover sales fell 31
percent in April from March, the steepest monthly loss since at
least November 2009. Today’s decline pared the stock’s rally
this year to 51 percent, still the best performer on the Sensex.

“The stock has risen on the Jaguar Land Rover story,”
said Shivani Kadam, an analyst at India Nivesh Securities in
Mumbai. “Any negative news on sales will trigger a correction
in price.”

Overseas investors sold a net 1.36 billion rupees ($25
million) of Indian stocks yesterday, paring their investment in
equities this year to 437 billion rupees, according to the
nation’s market regulator.